Determinants of foreign direct investment (FDI) in the power sector: A case study of Bangladesh

• Published in: Energy strategy reviews 2019-04, Vol.24, p.178-192
• Main Authors: Mahbub, Tareq, Jongwanich, Juthathip
• Format: Article
• Language: English
• Subjects: Bangladesh; Foreign direct investment; Gas; Government guarantee; Land; Tax
• ISSN: 2211-467X; 2211-467X
• DOI: 10.1016/j.esr.2019.03.001

This paper investigates the determinants of the decision-making process of firms conducting foreign direct investment (FDI) in the power sector. With the unavailability of long-term data series on FDI in Bangladesh's power sector, a mixed method approach (semi-structured interviews and questionnaires) is used. The findings indicate that regulatory aspects are the most influential for firms when engaging in FDI in the power sector, followed by economic and financial, political, and societal aspects. For individual factors, government's commitment to contracts, land acquisition, and tax exemption are key decision-making factors in conducting FDI, while road networks, gender diversity policies such as male predominance, and the right to freedom of association such as trade unions are considered least important. Firm-level characteristics, including firm ownership, firm size, and contract period, are important in ranking the determinants of conducting FDI. •We investigate the determinants of firms to conduct foreign direct investment (FDI).•We use a mixed method approach (semi-structured interviews and questionnaires).•Regulatory aspects are the most influential for FDI in the power sector.•Commitment to contracts, land acquisition, and tax exemption are also important.•Firm-level characteristics rank the decision determinants to conduct FDI.